As Bernanke pointed out, the problem with deflation is that you can't have negative interest rates, as people would withdraw their deposits and hold cash "under the matress". If interest rates remain high in real terms, people are inclined to save and not to spend, causing economic activity to contract further (Keynes' Paradox of Thrift).
There are some who have suggested encouraging people to spend by canceling, with a certain notice period, a certain percentage of notes in circulation (pick a number from 0-9 and cancel all notes whose serial number ends with that number - just don't tell anyone in advance what the number is).
Why not go a (big) step further and cancel, say, 10% of bank deposits? Not only would spending be encouraged, boosting the economy, but the canceled bank deposits would become bank equity, thus helping to recapitalise banks.
In recent decades we have increasingly confused money with wealth. Nowadays, money is seen as a means unto itself. This should be actively discouraged, using aggressive tactics if necessary.
There are some who have suggested encouraging people to spend by canceling, with a certain notice period, a certain percentage of notes in circulation (pick a number from 0-9 and cancel all notes whose serial number ends with that number - just don't tell anyone in advance what the number is).
Why not go a (big) step further and cancel, say, 10% of bank deposits? Not only would spending be encouraged, boosting the economy, but the canceled bank deposits would become bank equity, thus helping to recapitalise banks.
In recent decades we have increasingly confused money with wealth. Nowadays, money is seen as a means unto itself. This should be actively discouraged, using aggressive tactics if necessary.
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